44 Bus. Law. 721 (1989)
                         Business Lawyer
                            May, 1989
                                 
 *721 THE IMPACT OF LAW AND REGULATION ON TECHNOLOGY:  THE CASE
                   HISTORY OF CELLULAR RADIO
                                 
                     John W. Berresford [FNa]
                                 
                    Reproduced by permission. 

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                         INTRODUCTION

     Cellular radio technology is a new way of providing mobile telephone service.  It was
invented in the late 1960s, then went into legal and regulatory limbo for over a decade, and was
first offered to the general public in late 1983.  Today, over five years later, two million
customers use it regularly in their cars and via portable units. [FN1]  As for the future, cellular
technology may someday make car and portable telephones as widespread as the wire-bound
phones in our homes and offices.
     Seldom has a business grown so quickly.  Seldom, also, has a business been so influenced
by law and regulation.  For although cellular first came to most people's attention in the
mid-1980s, its legal and regulatory history dates back to the late 1960s.  Law and regulation
shaped, both broadly and in detail, the business that the public first saw in 1984.  In fact, from its
invention to its first public offering fifteen years, later, virtually every important decision about
cellular was made not by businessmen and customers, but by lawyers--judges and regulators
(most of whom are lawyers) deciding cases pleaded by counsel under the Communications Act
of 1934, the antitrust laws, and state public utility laws. [FN2]
Lawyers who reflect on the legal system's usefulness may ask whether, in this case, the system
produced good results--'good' meaning better than would have otherwise been the case in terms
of cellular's time of arrival, technical capabilities, number of cities served, price levels, service
features, and pace of innovation.
     *722 This article is one lawyer's answer to those questions.  This article will describe the
legal forces that shaped cellular service, four important decisions that were made about cellular
service, and the form that the business took on as a result. Then it will describe other decisions
that might well have been made instead--either by the same lawyers, or by businessmen and
customers if it had been left up to them.  Next, this article will speculate about how the cellular
industry would have grown along each of these 'paths not taken.' Finally, it will judge whether
those other outcomes would have created better cellular service for the public than exists toady.
The result will be a case history of how the legal and regulatory system influenced the
deployment of a new technology in this country and an opinion on whether that influence was for
the better or the worse.

THE LEGAL FRAMEWORK FOR CELLULAR
     Three bodies of law influenced the early years of the cellular business:  the
Communiciations Act of 1934, the federal antitrust laws, and state public utility laws.
The Communications Act comes into play because mobile telephone service requires radio
frequencies, and the Communications Act entrusts them to the Federal Communications
Commission ('FCC') on the theory that they are a scarce resource. [FN3]  The FCC, often
deciding among competing applicants for the same frequencies, allocates groups of frequencies
to different uses and then assigns frequencies within those groups to individual parties. [FN4] 
Under these licensing powers, the FCC decides who may use each frequency for what type of
communications, where, and when.  The FCC may also impose technical regulations on the use
of frequencies and on the equipment that transmits and receives communications on them. [FN5]
The statutory standard for FCC radio action is whatever would serve 'the public interest,
convenience, or necessity.' [FN6]
     The federal antitrust laws--primarily the Sherman Act and the Clayton Act--generally
prohibit anticompetitive behavior in commerce. [FN7]  They were particularly important in the
early history of cellular because of the central role played by the Bell System at the same time
that system was undergoing intense antitrust scrutiny.
     Finally, state public utility laws are now in effect in all fifty states and the District of
Columbia.  They create state regulatory commissions which control local 'telephone
service'--who may provide it, where, on what terms and conditions, and at what prices and
profits. [FN8]  Because cellular service was a form *723 of local telephone service offered to the
public for pay, it was assumed at the beginning that the state regulatory commissions could, and
would, subject cellular to their full powers.


               HISTORY OF MOBILE TELEPHONE SERVICE

MOBILE TELEPHONE SERVICE BEFORE CELLULAR
     While ordinary telephone service was becoming universal in the United States, mobile
telephone service did not enjoy similar growth. Although it was proved technically feasible in the
1920s, the critical mass of capital, technical talent, entrepreneurship, government interest, and
customer demand simply was not ther to create a going business.
     The FCC did not consider making a nationwide frequency allocation for mobile
telephone service for the general public until after World War II.  In 1947, AT&T (on behalf of
its subsidiaries, the Bell telephone companies) proposed that the FCC allocate a large number of
frequencies so that mobile telephone service could become a mass phenomenon. [FN9]  The
FCC decided not to and, in 1949, made only a small allocation for mobile telephone service.  The
FCC reasoned that other uses of the frequencies--for police and fire departments' two-way radios,
for example--would better serve the 'public interest.' [FN10]
     Of the small allocation it made, the FCC awarded about half the frequencies to the
telephone companies.  Significantly, it gave the other half to entities other than telephone
companies which wanted to provide mobile telephone service. [FN11]  These firms, which
became known as 'radio common carriers' or 'RCCs,' were the first FCC-created competition for
the Bell System.
     The mobile telephone systems which emerged from the FCC's 1949 decision and a few
later ones were technically primitive and small in capacity. [FN12] Typically, one tall radio
tower operating at high power covered an entire metropolitan area; a frequency used in a
conversation in one area could not be 're-used' in another conversation for seventy-five miles. 
Because of the small allocation that the FCC had made, only twenty-three conversations could
occur simultaneously *724 in the same area, [FN13] and a system could offer acceptable service
to only about 250 customers.  This capacity was exhausted in major cities by the mid-1950s.  The
existing technology had no ability to reuse frequencies at shorter distances or otherwise to
increase the systems' capacity.  Car telephones became viewed as toys for a few 'fatcats.' [FN4]
     The telephone companies and the RCCs evolved differently in the early mobile telephone
business.  The telephone companies were primarily interested in providing ordinary, 'basic'
telephone service to the masses and, therefore, gave scant attention to mobile services throughout
the 1950s and 1960s.  The RCCs were generally small enterpreneurs that were involved in
several related businesses--telephone answering services, private radio systems for taxicab and
delivery companies, maritime and air-to-ground services, and 'beeper' paging services.  As a
class, the RCCs were more sales-oriented than the telephone companies and won many more
customers; a few became rich in the paging business.  The RCCs were also highly independent of
each other; aside from sales, their specialty was litigation, often tying tlephone companies (and
each other) up in regulatory proceedings for years. [FN15]

THE EVOLUTION OF CELLUAR TECHNOLOGY
     In 1968, the FCC, noting the 'serious congestion' on the frequencies that were then
available, [FN16] showed interest for the first time in a 'truly efficient high capacity' mobile
telephone service.  The FCC floated the idea of allocating a large number of frequencies to such
a service if it proved technically feasible. [FN17]
     *725 AT&T, again on behalf of its Bell telephone companies, suggested that a 'cellular'
concept would be feasible. In a cellular system, there would be many towers, each low in ehight
and operating at low power, each covering a 'cell' a few miles in radius, and all of them
collectively covering an entire metropolitan area. Each tower would use only a few of the total
frequencies allocated to the system, and as cars moved across the area their calls would be
'handed off' from tower to tower and among the available frequencies. The same frequency could
be 're-used' in several simultaneous conversations at far smaller distances than was possible on
conventional systems.  Cellular towers would be linked to each other and to the 'wireline'
telephone network by a central switch.  In the future, when cells' capacity was exhausted, they
could be 'split' into several smaller cells, each with almost the same capacity as the original,
larger cells.  The advantages of cells would be low power operation, handoff, reuse, and
cell-splitting.  The beauty of the cellular concept was that a finite number of frequencies could
accommodate a large, and theoretically infinite, number of customers. [FN18]  Cellularity
created, as the FCC realized, 'the possibility of the service developing into a consumer item.'
[FN19]
     In 1970, the FCC allocated 75 MegaHertz ('MHz,' a quantitative measure of frequencies,
like quarts of milk) to 'common carrier mobile service' and expressed interest in AT&T's cellular
concept. [FN20]  The FCC authorized AT&T's Bell Telephone Laboratories ('Bell Labs') to test
the cellular concept in real urban traffic conditions in Newark and Philadelphia.  In 1971, Bell
Labs reported to the FCC that the concept worked, with cell-splitting being feasible with cells
whose radii were as small as 1.4 miles. [FN21]

THE FCC'S CELLULAR DECISIONS
     When it next addressed cellular, in 1974, the FCC approved the cellular concept and
allocated 40 MHz for the development of cellular systems. [FN22] It *726 specifically stated that
it wanted cellular systems to be compatible with each other so that customers could 'roam' from
one city to another and use their car phones. [FN23]
     Also in 1974, the FCC faced, for the first time head-on, the basic policy issue of who
would be in the business.  In its 1970 decision, the FCC had said, almost off-handedly, that only
telephone companies would be allowed to operate cellular systems. [FN24]  It had implied that
cellular service was just another form of telephone service, to be provided, naturally, by the
telephone companies. This prospect drew three responses.  First, the telephone companies
applauded, noting that they had invented cellular technology, had already incurred vast expense,
and deserved to recoup the investment. [FN25]  Besides, the FCC had found that cellular service
was urgently needed and only the telephone companies showed interest in and the technical
ability for the enormously complicated job of making it a reality in every city in the country.
[FN26]
     The RCCs waved the banner of small business and entrepreneurship. They warned that
their little systems would be crushed by the telephone companies' price- gouging and predatory
competition if the FCC let the 'wireline monopolies expand into the mobile communications
market which has been traditionally served by competitive entities.' [FN27]  Finally, the
Department of Justice argued against letting the telephone companies into the cellular business,
but from a perspective opposite from the RCCs.  The department theorized that the telephone
companies, wanting to protect their position in the basic local telephone business, would stunt
the growth of cellular service and thus prevent it from ever reaching the high capacity and low
price where it would compete with their established service. [FN28]
     In 1974, [FN29] 1975, [FN30] 1981, [FN31] and 1982, [FN32] the FCC made a series of
Solomonic compromises under its 'public interest' standard.  A constant assumption in all *727 is
decisions was that it, the FCC, would decide the issues:  whether one or more cellular systems
would be allowed in each area; whether telephone companies would be allowed to operate them;
who would make cellular telephones and who would sell them; and so on down to technical
matters such as whether spacing between voice channels would be 25, 30, 40, or 50 KiloHertz
('KHz'--like MHz, a quantitative measure of frequencies).
     The FCC's final decision was to allow two cellular systems in each area, each using 20
MHz. [FN33]  One would be operated by an arm's length affiliate of the telephone company in
the area, and the other by another entity chosen from among competing applicants for the
so-called 'nonwireline' franchise. [FN34] If the telephone company's affiliate was ready to begin
service before the nonwireline licensee was chosen, the FCC would consider delaying the
wireline 'headstart' until the nonwireline was also ready. [FN35] The Bell System could
manufacture cellular telephones but could not 'burdle' them with service by requiring that
customers of Bell service also use Bell telephones. [FN36]  And, channel spacing would be 30
KHz. [FN37]
     Based on these decisions, the FCC began awarding construction permits to cellular
applicants in late 1982 and 1983. [FN38]  Zoning boards were hostile to the many radio towers
that cellular service required, but enough approvals were won for systems to be constructed in
about a year.  In later 1983 and 1984, cellular service began in most large cities. [FN39]  In each
city, a telephone company's separate subsidiary offered service on one system, and a nonwireline
offered service on the other.  Most nonwirelines in the large cities were consortia of at least one
local RCC and newcomers to the local telecommunications business--typically a high-tech
electronics company had a venture capitalist that had no long-term interest in
telecommunications. [FN40]  In most cities, both systems began service within a year of each
other.  (In no case did the FCC order 'headstart delay.')  A highly competitive business in cellular
telephones developed, with retail prices falling from $3,000 to as low as $1,000 in two years. 
Finally, not only did channel spacing not exceed 30 KHz, but technical compatibility ('roaming')
was achieved: Drivers between Philadelphia and Baltimore, for *728 example, could use their
cellular phone owners could make a cellular phone owners could make a cellular call while
boarding a plane in Houston and make another hours later while checking into a Washington
hotel.

THE BELL SYSTEM BREAKUP
     On January 1, 1984, in the midst of cellular's arrival in the marketplace, the Bell System
broke itself up to settle an antitrust suit between AT & T and the Department of Justice. [FN41] 
The breakup divided the system roughly into a local part and an 'all other' part that included long
distance. [FN42]  The local part, which consisted of all the Bell telephone companies, was
further broken up into seven regional pieces, which were barred from the long distance business.
[FN43]  Cellular service fell on the 'local' side of the breakup and Bell's interests in it were
accordingly split into seven regional cellular service companies. [FN44]
     The Bell System breakup had two unforeseen effects on the Bell System's provision of
cellular service.  First, the loca-vs.-long distance division imposed geographical boundaries on
the Bell cellular systems that had been drawn according to the conventional telephone network
and sometimes made no sense in the cellular business. [FN45] Therefore, to expand their
systems' coverage--for example, to expand the New York City system to cover northern New
Jersey--Bell cellular companies had to obtain the approval of the court supervising the Bell
breakup.  The court granted these these approvals, but only after proceedings requiring from
eight months to over three years. [FN46]
     Second, within weeks of the breakup, the Bell regional companies realized that, now that
each of them was independent of the others and limited to one region, one regional company
would have neither the market power nor the incentive to stunt cellular growth [FN47] in the
other regions' territories. The Bell *729 regional companies, therefore, began acquiring
'nonwireline' cellular properties outside their regions.  The Justice Department, the FCC, and the
courts agreed that such acquisitions were allowed by the terms of the Bell System breakup and
under antitrust principles in general.  Five Bell regional companies acquired approximately
one-third of the nonwireline side of the cellular business outside of their respective regions.
[FN48]

THE FCC'S LOTTERY DECISION
     In its cellular decisions, the FCC had decided to award licenses as it always had in the
mobile telephone business--to carriers chosen in comparative hearings or to joint ventures
formed as a settlement among competing applicants. [FN49]  This decision had two results: Only
a few companies applied for each permit (because potential applicants that locked the
wherewithal to merit comparison to a Bell or MCI application knew they would lose in hearings
and didn't bother to file), and, in the few markets where applicants did not settle, FCC
proceedings consumed up to two years and delayed cellular service. [FN50]
     In mid-1984, the FCC decided that this delay was intolerable. It jettisoned comparative
hearings and decided to choose cellular carriers in subsequent markets by lottery (while keeping
the settlement option open). [FN51]  The results were dramatic:  With each applicant (or lottery
ticket holder) having an equal chance regardless of merit, the number of nonwireline applicants
exploded (from 3 in some large markets to 1,000 in some small ones). [FN52] With so many
applicants, settlement was impossible in many markets and lotteries were held.  *730 Lottery
winners, many of whom were simply speculators with no interest in providing service, sold their
licenses to experienced carriers at enormous profits. Service in some smaller markets began in
1987, with rates in many including the carriers' cost of 'buying out' the lottery winners.

THE PRESENT MOBILE TELEPHONE BUSINESS
     Cellular service is now available on two competing systems in approximately 250 cities. 
Cellular operators compete by expanding their coverage areas, adding features such as telephone
answering machines and voice-activated dialers, devising new service plans, and cutting
telephone prices. Acquisitions of nonwirelines by Bell companies and expensive buyouts of
lottery winners continue to occur. [FN53]  The RCCs, except for the few that joined successful
consortia in nonwireline systems, no longer play a significant role in the mobile telephone
business.
     The large majority of state legislatures and regulatory commissions have found that
cellular service today is so different from ordinary telephone service that they have deregulated
it. [FN54]
     In the marketplace, cellular service has achieved more acceptance than similar items
(television, microwave ovens, and video cassette recorders) had achieved five years after their
introduction.  Customers have recorded no dissatisfaction with price, coverage, service quality,
roaming compatibility, options, or pace of innovation.
     The current business has its critics, however.  Some mourn the extinction of the small,
entrepreneurial RCCs and say that the business would be better if 'small business' had been
protected. Others argue that the original 'just another form of telephone service' structure, with
one cellular system using 40 MHz, could have served more customers at lower cost than two
systems using *731 20 MHz each. [FN55] Almost all observers, even those who applaud the
industry structure that finally emerged, fault the legal and regulatory process for taking so long.
[FN56]  Was it really necessary for a technology proven feasible in 1971 to wait until 1983 to be
offered to the public?  Would not deregulation or at least faster regulation have been better?
     These were all real possibilities, and it is worth considering whether the public would
have fared better under them.


               FOUR OTHER POSSIBLE OUTCOMES

THE FCC'S DECISION TO REGULATE
     By the mid-1970s, the FCC had decided the there would be something called cellular
service and that it would occupy 40 MHz of frequencies. [FN57]  The FCC had also defined
generally what cellular service was.  What if the FCC had decided to stop at the
frequency-allocation and initial technology-definition stage and had forgone the next eight years
of regulating the business's structure? Unregulated radio businesses have existed before and
since.  The broadcasting industry grew up when frequencies were unregulated, before the Radio
Control Act of 1927. [FN56]  Recently the FCC has decided not to set technical standards for
certain kinds of radio equipment. [FN59] In cellular, suppose the FCC had declared in 1975 that
the 40 MHz was simply 'up for grabs' to the first person who provides something recognizable as
cellular service on it?  How would the business have developed, 'land-rush' style?
     Most likely, the 40 MHz would have been occupied quickly by the companies that were
in the mobile telephone business at that time--the telephone companies and the RCCs.  Within
two years, the spectrum in the largest cities would have been occupied, on an exclusive basis in
each area, by either the local telephone company or a local RCC.
     If this had happened, cellular service would have begun by the late 1970s. However, it
would have included none of the competition--in coverage areas, service plans, prices, and
telephones--that has been prominent in the business *732 and has benefited customers. Also, if
the RCCs had won the 'land rush' in a large number of cities, the result would have been a
national coverage map spotted with technically incompatible systems.  Even the largest RCCs in
the mid-1970s were local entrepreneurs rather than planners, more interested in sales than in
negotiating standards for nationwide technical compatibility. Roaming would have been
impossible and differing technical standards for systems and telephones would have discouraged
manufacturers from producing in volumes that would allow low prices.  The nationwide
compatibility that exist today would have taken a decade to emerge from industry negotiation
and agreement.
     Even longer would have been needed for the courts to fashion a common law of 'radio
rights' to decide the inevitable disputes over frequencies, territory, and interference. [FN60]  The
cellular business would have moved, if at all, in painfully slow fits and starts.
     In sum, if the FCC had decided not to regulate the cellular business's structure, cellular
service would have arrived sooner but it would have been of lower quality and higher priced than
it is today. It would have remained so for many years.

THE FCC'S FIRST INDUSTRY STRUCTURE
     The FCC originally planned that cellular service would be just another form of telephone
service.  Each area would have one cellular system, operated as part of the local telephone
company's telephone service and regulated as such by state regulatory commission. [FN61] What
if the FCC had stayed with this idea (and it had survived review under the Communications Act
and the antitrust laws)? [FN62]  How would cellular service be today if it had been treated as
ordinary telephone service?
     Strictly speaking, there would be no cellular business today any more than there is a
Touch-Tone business or a Message Unit business. Like those services, cellular service would be
one item in the array of telephone company offerings.  Service would have begun sooner because
telephone companies, as public utilities with the power of eminent domain, would have been
spared the building delays that plagued cellular carriers in the early years.
     *733 With the telephone companies as the only providers of cellular service, however,
there would have been no competition (and none of the benefits of it described in the first
hypothetical above). Also, because of the telephone companies' lack of sales orientation in the
late 1970s, [FN63] there would not be nearly as many cellular customers as there are today.
     Finally, as a local service offered by the telephone companies in the 1970s, cellular
service would undoubtedly have been regulated by the state regulatory commissions as a
telephone company offering. [FN64]  The state commissions would have treated it as a luxury or
'vertical' service and set its price high in order to maximize contribution to basic service. [FN65] 
Certain that their cellular 'profits' would be used to support their basic service obligations, the
telephone companies would have had no economic incentive to sell or expand cellular service. 
This, too, would have stunted cellular growth.
     In sum, as in the first hypothetical, cellular service would have arrived sooner but would
be of lower quality, less used, and higher priced than it is today.

THE BELL SYSTEM BREAKUP
     What if the FCC had made the cellular decisions it made in the early 1980s, but the Bell
System breakup had never happened?  How would the cellular business look today if the Bell
part of it were still a nationwide entity including local and long distance service and
manufacturing?
     One certain effect would be that no nonwirelines would have been acquired by the Bell
companies (or company), and the nonwirelines today would still be an independent half of the
business.  They would have had less technical expertise, access to capital, and long-term interest
in the business, but more marketing and sales expertise.  These differences have too many
cross-currents for their 'net' to be clearly better or worse than what actually happened with the
nonwirelines.
     Another effect of the continued existence of the Bell System, and one whose impact is
clear, would be that the Bell cellular service companies would have been able to expand
coverage across the local-vs.-long distance boundaries that the breakup created.  The Bell cellular
companies and their customers would have been spared the wait of up to three years for court
approval to expand their systems' coverage beyond 'local' boundaries.  The result would have
been cellular service in outlying areas years sooner than has in fact been possible.
     In sum, the effect of the Bell breakup on the cellular business has been acquisitions
whose impact is too complex and contradictory to be clear and a *734 delay in cellular system
expansion for a large group of carriers.  This delay in expansion has certainly hurt the public.
[FN66]  No simple judgment of public benefit or harm can be ventured.
     This hypothetical is an example of the unintended effects of the legal and regulatory
process.  The FCC, in its cellular decisions, generally knew what effects they would have on the
business.  The authors of the Bell System breakup did not; for example, AT&T and the Justice
Department did not specifically intend the Bell System breakup to facilitate the acquisition of
nonwirelines by Bell regional companies outside their regions.  These unintended effects,
therefore, must be attributed to luck, good or bad, rather than to the prescience or wisdom of the
decisionmakers.

THE FCC'S LOTTERY DECISION
     What if the FCC had stayed with the comparative hearing and settlement method of
choosing cellular carriers and had not adopted its lottery system?
     There would have been fewer applicants than the lottery system produced. Settlements
would probably have been reached in most markets, but the high value of the licenses and the
applicants' inexperience at dealing with each other [FN67] would have made settlement
impossible in many other markets. Hearings in the latter markets would have delayed service
there for up to a decade, [FN68] and a few speculators would not have won lotteries and thereby
become rich at the expense of cellular customers.
     In sum, cellular service would have begun in many small markets at about the same time
it actually began; in others, it would have begun years later but at a lower price.  Viewing cellular
service as a benefit for the public as a whole and higher prices as a burden only on cellular
customers, [FN69] the public benefited from the FCC's decision to choose cellular carriers by
lottery.


                         CONCLUSION

     Observers of the cellular business's history, especially during the decade of intense legal
and regulatory activity (roughly from 1973 through 1984), are used to criticizing it as a decade of
delay. [FN70] This criticism is factual: There is no doubt that cellular service was proved
technically feasible in the early 1970s and was not offered to the public until late 1983.
     *735 seen from the present perspective, however, the decade was not wasted.  A decade
is not unusually long for our melting pot society to resolve policy issues with a potentially major
impact on the public.  The federal government took longer to decide the same kind of business
structure questions about television. [FN71]
     More important, the legal and regulatory process has resulted in a business that operates
in 250 cities, is technically compatible nationwide, and is adequately capitalized and driven to
expand and innovate by competition and the profit motive.  Three (and maybe all four) of the
four hypotheticals discussed above, each of which was strongly advocated by industry
participants at the time and each of which could well have come true, would have produced a
business lacking one or more of these good features.  Intentionally or not, and aided by foresight
or luck, the legal and regulatory process produced a business that is significantly better for the
public than would otherwise be the case.  In this instance, at least, an unseen had guided the
lawyers as well as the marketplace.

FNa  Mr. Berresford is a member of the District of Columbia, New York, and Pennsylvania bars
and practices law with Baskin, Flaherty, Elliott & Mannino in Philadelphia and Washington,
D.C.
     Editor's note:  John D. Pellegrin of the District of Columbia bar served as reviewer for
this article.

FN1.  Booz, Allen and Hamilton, Inc., Cellular Service Demand Study, Executive Summary 2-3
(1988).

FN2.  In most regulatory cases, judges and regulators are faced with an existing business and the
counsel for the existing business would make arguments which have been approved by their
business-clients. When the cellular cases were decided, however, the cellular business did not
exist.  Thus, there were no cellular businessmen in the normal sense. Therefore, the judges,
regulators, and attorneys had unusually wide room in which to exercise their judgment.

FN3.  47 U.S.C. s 301 (1982); FCC v. Sanders Bros. Radio Station, 309 U.S. 470, 474 (1940).

FN4.  47 U.S.C. ss 303, 307-309 (1982).

FN5.  47 U.S.C. ss 303(c), 303(s) (1982).

FN6.  47 U.S.C. ss 307-309 (1982).

FN7.  15 U.S.C. ss 1, 2, 12 (1982).

FN8.  See, e.g., 66 Pa. Cons. Stat. Ann. s 102(1)(vi) (Purdon Supp. 1988) (definition of public
utility includes 'transmitting messages . . . by telephone or telegraph or domestic public land
mobile radio service . . . for the public compensation').

FN9.  Gen. Mobile Radio Serv., 13 F.C.C. 1190, 1212 (1949).

FN10.  Id. at 1193, 1205-07 ('[r]adio services which are necessary for the safety of life and
property deserve more consideration than those services which are more in the nature of
convenience or luxury').

FN11.  Id. at 1218.
     [W]e have taken particular care to provide a family of frequencies within which the
development of common carrier mobile radio systems by enterprises other than existing
telephone companies may take place. These dispositions have been effected advisedly, and with
the purpose, among others, of fostering the development of competing systems, techniques, and
equipment.
Id.

FN12.  See Land Mobile Serv. Use of 806-960 MHz Band, 14 F.C.C.2d 311, 313- 14 (1968)
(notice of inquiry) [hereinafter Land Mobile Serv. Notice]; Cellular Communications Sys., 78
F.C.C.2d 984, 1009 (1980) (notice of inquiry) (AT&T's description of contemporary mobile
telephone service systems).

FN13.  Cellular Communications Sys., 78 F.C.C.2d at 1009.

FN14.  In 1968, FCC Commissioner Robert E. Lee deried mobile telephone service as 'another
status symbol--telephone for each family car' and viewed with alarm '[t]he possibility of
frivolous use of spectrum that is presented with a car radio for everybody who can afford to pay
his phone bill.'  Land Mobile Serv. Notice, supra note 1i, at 320.
     During the decades when the FCC was denying frequencies to mobile telephone service,
it made relatively generous allocations to 'private' mobile radio systems.  Private systems are
usually operated by groups of businessmen and entrepreneurs in a metropolitan area on a not for
profit basis.  In general, they provided walkie-talkie-type communications between a business
headquarters and its vehicles.  From the 1950s to the present, private systems have met some of
the nation's need for mobile communications, but not the broad public demand for
telephone-quality mobile telephone service.  See generally id. at 317; National Ass'n of
Regulatory Util. Comm'rs v. FCC, 525 F.2d 630, 634, 639- 47 (D.C. Cir. 1975), cert. denied, 425
U.S. 992 (1976).

FN15.  See Cellular Communications Sys., 78 F.C.C.2d at 1011 (regulatory licensing litigation
for some air-to-ground telephone systems requiring ten years); Land Mobile Serv., 51 F.C.C.2d
945, 967 n.37, 971 (1975), aff'd sub nom.  National Ass'n of Regulatory Util. Comm'rs v. FCC,
525 F.2d 630 (D.C. Cir. 1975), cert. denied, 424 U.S. 992 (1976) (memorandum opinion and
order) [hereinafter Land Mobile Serv. Memorandum Opinion] (in mobile service, 'delays of up to
a year are not uncommon and in many cases grants take up to [four] or [five] years'); Land
Mobile Serv., 46 F.C.C.2d 752, 765 n.5 (1974) (second report and order) [hereinafter Land
Mobile Serv. Second Report] ('interminable delays in the authorization of [mobile] service, in
some cases extending up to [four] or [five] years and at times longer').

FN16.  Land Mobile Serv. Notice, supra note 12, at 312.

FN17.  Id. at 314, 317.  For subsequent decisions in this docket, see Spectrum Space for Land
Mobile Serv., 19 Rad. Reg. 2d (P&F) 1663 (1970) (first report and order) [hereinafter Land
Mobile Serv. First Report]; Land Mobile Serv. Second Report, supra note 15; Land Mobile Serv.
Memorandum Opinion, supra note 15.

FN18.  See Land Mobile Serv. First Report, supra note 17, at 1673-74, 1686; Land Mobile Serv.
Second Report, supra note 15, at 753-54, 756; Land Mobile Serv. Memorandum Opinion, supra
note 15, at 954 & n.17, 955.  Later descriptions were more refined. See, e.g., Cellular
Communications Sys., 78 F.C.C.2d 984, 985 n.2 (1980); Cellular Communications Sys., 86
F.C.C.2d 469, 470 n.1 (1981), modified, 89 F.C.C.2d (1981), further modified, 90 F.C.C.2d 571
(1982), petition for review dismissed sub nom. United States v. FCC, No. 82-1526, slip op. (D.C.
Cir. Mar. 3, 1983). See also National Ass'n of Regulatory Util. Comm'rs v. FCC, 525 F.2d 630,
634 (D.C. Cir.), cert. denied, 424 U.S. 992 (1976); Land Mobile Serv. Memorandum Opinion,
supra note 15; United States v. Western Elec. Co., 578 F. Supp. 643, 646-47 (D.D.C. 1983); MCI
Cellular Tel. Co. v. FCC, 738 F.2d 1322, 1324 (D.C. Cir. 1984); Gencom, Inc. v. FCC, 832 F.2d
171, 173 (D.C. Cir. 1987).

FN19.  Land Mobile Serv. Second Report, supra note 15, at 757.

FN20.  Land Mobile Serv. First Report, supra note 17, at 1666, 1674.

FN21.  See Land Mobile Serv. Second Report, supra note 15, 752-53, 756.

FN22.  Id. at 756, 783-84.  A year later, the FCC found that 'the public interest requires that the
development of cellular systems be carried forward as swiftly as possible.'  Land Mobile Serv.
Memorandum Opinion, supra note 15, at 955.

FN23.  Land Mobile Serv. Second Report, supra note 15, at 760, 801.

FN24.  Land Mobile Serv. First Report, supra note 17, at 1675.

FN25.  The FCC recognized from the start that a cellular system is expensive. Land Mobile Serv.
Second Report, supra note 15, at 760.  The cost of constructing and operating a cellular system
for one year in Chicago was estimated in the early 1980s to be between $16 million and $19
million. Advanced Mobile Phone Serv., 91 F.C.C.2d 512, 514, 516 (1982).  AT&T estimated
that the net operating losses of its start-up cellular subsidiary from mid-1982 through 1986 was
$967.9 million.  ATT Cellular Co. Capitalization, 53 Rad. Reg. 2d (P&F) 1083, 1085 (1983).

FN26.  Land Mobile Serv. Second Report, supra note 15, at 760. See also Cellular
Communications Sys., 86 F.C.C.2d 469, 483-86, 489 (1981).

FN27.  Land Mobile Serv. Second Report, supra note 15, at 760 (noting 'potential
anti-competitive action on the part of wireline telephone companies through the use of
cross-subsidies').  See also Land Mobile Serv. Memorandum Opinion, supra note 15, at 951.

FN28.  Cellular Communications Sys., 86 F.C.C.2d at 550.  The Department of Justice filed an
appeal against the FCC decisions on this ground but later abandoned it.  United States v. FCC,
No. 82-1526, slip op. (D.C. Cir. Mar. 3, 1983).

FN29.  Land Mobile Serv. Second Report, supra note 15.

FN30.  Land Mobile Serv. Memorandum Opinion, supra note 15.

FN31.  Cellular Communications Sys., 86 F.C.C.2d at 469.

FN32.  Cellular Communications Sys., 89 F.C.C.2d 58, modified, 90 F.C.C.2d 571 (1982).

FN33.  Cellular Communications Sys., 86 F.C.C.2d at 474-82, modified, 89 F.C.C.2d at 60-61.

FN34.  Cellular Communications Sys., 86 F.C.C.2d at 482-95, modified, 89 F.C.C.2d at 66-80.

FN35.  Cellular Communications Sys., 86 F.C.C.2d at 491 n.57, modified, 89 F.C.C.2d at 74-75.

FN36.  Cellular Communications Sys., 83 F.C.C.2d at 497-98, modified, 89 F.C.C.2d at 83-82.

FN37.  Celllular Communications Sys., 86 F.C.C.2d 505-07.

FN38.  Advanced Mobile Phone Serv., 91 F.C.C.2d 512 (1982) (Chicago); Advanced Mobile
Phone Serv., 52 Rad. Reg. 2d (P&F) 1104 (1982) (Pittsburgh); Cellular Communications Sys.,
93 F.C.C.2d 683 (1983) (Los Angeles); Advanced Mobile Phone Serv., 53 Rad. Reg. 2d (P&F)
12 (1983) (Phoenix).  The Pittsburgh and Phoenix order were affirmed in MCI Cellular Tel. Co.
v. FCC, 738 F.2d 1322 (D.C. Cir 1984).

FN39.  See, e.g., Chicago Ltd. Partnership, 95 F.C.C.2d 538 (1983) (Chicago); Bell Atlantic
Mobile Sys., No. 29,029-CL-L-84 (FCC July 12, 1984) (LEXIS, Fedcom library, FCC Rpts. 2d
file) (Philadelphia); New York SMSA Ltd. Partnership, 58 Rad. Reg. 2d (P&F) 525 (1985) (New
York).

FN40.  See, e.g., Cellular Communications Sys., 93 F.C.C.2d 26, 27 (1983); LIN Cellular
Communications Corp., 53 Rad. Reg. 2d (P&F) 419 (1983).

FN41.  United States v. American Tel. & Tel. Co., 552 F. Supp. 131, 226-34 (D.D.C. 1982),
aff'd, 460 U.S. 1001 (1983).

FN42.  Id. at 188-89, 227.

FN43.  United States v. Western Elec. Co., 569 F. Supp. 990, 994 n.11 (D.D.C. 1983).

FN44.  United States v. Western Elec. Co., 578 F. Supp. 643, 644 n.4 (D.D.C. 1983) (citing Bell
System Plan of Reorganization at 385-89).

FN45.  Id. at 648 ('The [local-vs.-long distance] boundaries were drawn with reference to such
factors as the existing arrangement of the landline telephone systems, landline calling patterns,
the location of toll switching centers, and the attractiveness of areas to interexchange carriers.  . .
. In contrast, the technological and competitive issues implicated by mobile radio services are, in
some locations, significantly different').

FN46.  United States v. Western Elec. Co., 578 F. Supp. at 643. Later approvals, such as
expanding the Bell New York City cellular system to cover parts of central New Jersey, required
two years' consideration. A request to expand the Bell Philadelphia cellular system to cover
northeastern Maryland and to allow handoff between adjacent system has been pending for over
three years.  The court was concerned that a wholesale lifting of the long distance prohibition for
the Bell cellular companies would allow cellular systems to be linked into 'one, expansive mobile
radio system' which would override the basic exclusion of the Bell regional companies from long
distance service.  Id. at 647.  See also United States v. Western Elec. Co., 673 F. Supp. 525,
550-52 (D.D.C. 1987), appeal docketed, No. 87-5388 (D.C. Cir. Nov. 5, 1987).

FN47.  See supra note 28 and accompanying text.

FN48.  See, e.g., United States v. Western Elec. Co., 1986-1 Trade Cas. P 66,987 (D.D.C. 1986)
(court approved of an acquisition of Communications Industries, Inc. by Pacific Bell);
Metromedia Co., 1 F.C.C. Rec. 1227 (1986) (aff'd, 3 F.C.C. Rec. 595 (1988) (FCC approved of
an acquisition of Metromedia cellular properties by Southwestern Bell); Communications Indus.,
No. 24,278-CD-TC-1-85 (FCC Nov. 8, 1985) (LEXIS, Fedcom library, FCC Rpts. 2d file) (FCC
approved of an acquisition of Communications Industries, Inc. by Pacific Bell).  See also United
States v. Western Elec. Co., 604 F. Supp. 256, 263-64 (D.D.C. 1984) (court approved of a Bell
regional company operating a cellular system in the Gulf of Mexico); United States v. Western
Elec. Co., 797 F.2d 1082, 1089-91 (D.C. Cir. 1986) (court approved of regional companies
providing radio services in other regions, thereby reversing United States v. Western Elec. Co.,
627 F. Supp. 1090 (1986)).

FN49.  If there is more than one qualified applicant, a comparative hearing is needed to decide
between them.  Land Mobile Serv. Memorandum Opinion, supra note 15, at 954 (citing
Ashbacker Radio Corp. v. FCC, 326 U.S. 327 (1945)); Cellular Communications Sys. 86
F.C.C.2d 469, 490-91 (1981) (settlements encouraged as an alternative).

FN50.  See, e.g., MCI Cellular Tel. Co., 96 F.C.C.2d 1040, 1041 (1983), aff'd on review, 96
F.C.C.2d 1015, aff'd on reconsideration, 98 F.C.C.2d 1274 (1984) (initial decision regarding
Pittsburgh); Rogers Radiocall, Inc., 96 F.C.C.2d 1194 (1983), aff'd on review, 96 F.C.C.2d 1172,
aff'd on reconsideration, 98 F.C.C.2d 1293 (1984) (initial decision regarding Chicago).

FN51.  Cellular Lottery Rulemaking, 98 F.C.C.2d 175, 188-90 (1984), aff'd on reconsideration,
101 F.C.C.2d 577, aff'd on further reconsideration, 59 Rad. Reg. 2d (P&F) 407 (1985), aff'd sub
nom. Maxcell Telecom Plus, Inc. v. FCC, 815 F.2d 1551 (D.C. Cir. 1987).

FN52.  Under the comparative hearing system, 141 non-wireline applications were filed for one
group of 30 markets.  MCI Cellular Tel. Co. v. FCC, 738 F.2d 1322, 1327 (D.C. Cir. 1984). 
Under the lottery system, 15,000 non-wireline applications were filed for another group of 30
markets.  Mobile Phone News, Mar. 10, 1988, at 4.
     The FCC's lottery rules provided generally that a person could file only one application
per market.  More than a few persons, however, wanted more than 'one name in the hat' and filed
several applications, using relatives, neighbors, and business associates as 'straw men.'  In some
cases, significant administrative and criminal sanctions were imposed on such schemes.  See,
e.g., Rural Cellular Serv., 64 Rad. Reg. 2d (P&F) 1382, 1383 n.4 (1988) ( [a]pplications were
mass marketed and made available free or at a modest price to people with little or no interest in
providing cellular service'); Rural Cellular Serv., 64 Rad. Reg. 2d (P&F) 1391, 1392 (1988)
('there have been abuses by non-wireline applicants'); Theodore M. Jones, 64 Rad. Reg. 2d
(P&F) 1582 (1988); Christina Communications, 63 Rad. Reg. 2d (P&F) 277 (1987).

FN53.  See, e.g., Communications Daily, Mar. 28, 1989, at 2-3.

FN54.  See, e.g., 66 Pa. Cons. Stat. Ann. s 102(2)(iv) (Purdon Supp. 1988) (definition of public
utility does not include '[a]ny person or corporation, not otherwise a public utility, who or which
furnishes mobile domestic cellular radio telecommunications service'); Advisory Opinion of
General Counsel of District of Columbia Public Service Commission No. 83-6 (Aug. 17, 1983)
(interpreting D.C. Public Service Code to allow Public Service Commission to forbear from price
regulation of cellular service providers).
     In its cellular decisions, the FCC had asserted federal primacy over the states in the areas
of public need, technical standards, and competitive market structure for cellular service. 
Cellular Communications Sys., 86 F.C.C.2d 469, 503-05 (1981), modified, 89 F.C.C.2d 58,
94-96 (1982).

FN55.  The FCC, in deciding to have two systems in each area rather than one (or three, four,
etc.), struck a balance between the greater efficiency of one system and the less predictable but
potentially greater benefits of competition.  Cellular Commmunications Sys., 78 F.C.C.2d 984,
990-93 (1980), modified, 86 F.C.C.2d at 474-82, further modified, 89 F.C.C.2d at 60-64.

FN56.  See, e.g., MCI Cellular Tel. Co. v. FCC, 738 F.2d 1322, 1328 (D.C. Cir. 1984) ('cellular
technology has been available for introduction into the marketplace for over a decade.  . . . it is
high time to move cellular telephone services from the FFC's regulatory process to the
marketplace'); Cellular Mobile Sys. v. FCC, 782 F.2d 182, 183, 197 (D.C. Cir. 1985) (criticizing
the 'slow march from the regulatory arena to the market place' and the 'glacial regulatory pace' of
cellular radio communications).

FN57.  See supra notes 18-20 & 22.

FN58.  Hoover v. Intercity Radio Co., 286 F. 1003 (D.C. Cir. 1923), cert. denied, 266 U.S. 636
(1924).  But cf. United States v. Zenith Radio Corp., 12 F.2d 614 (N.D. Ill. 1926).  See generally
W. Davis, Radio Law 1-3, 30-48 (1929).

FN59.  AM Stereophonic Broadcasting, 3 F.C.C. Rec. 403 (1988) (FCC decided to forbear from
setting a transmission standard for AM stereo).

FN60.  The failure of the federal courts, state courts, and state and local legislature to develop a
workable law of radio rights in the 1920s (when the broadcasting business was born) is well
documented. See, e.g., W. DAVIS, supra note 58, at 48-77.

FN61.  See supra note 24 and accompanying text.

FN62.  The FCC's decisions in Land Mobile Serv. Memorandum Opinion, supra note 15, barely
survived appellate review, even after modifications to allow RCCs to apply for the exclusive
cellular franchise in an area.  National Ass'n of Regulatory Util. Comm'rs v. FCC, 525 F.2d 630,
635-39 (D.C. Cir.), cert. denied, 425 U.S. 992 (1976).  The court said that the FCC made AT&T
'the likely recipient of a virtual monopoly in the operation of cellular systems, [which] will result
in significant increases in its market power . . . in two fields aprt from traditional wireline
communications.'  Id. at 637.  The court affirmed the FCC orders because future proceedings
could address its antitrust concerns under the statutory 'public convenience, interest and
necessity' standard.  Id. at 639.

FN63.  See supra text accompanying note 15.

FN64.  See supra note 8 and accompanying text.

FN65.  See, e.g., Pennsylvania Pub. Util. Comm'n v. Bell Tel. Co., 54 Pa. P.U.C. 191, 204
(1980).  ('Net contribution from veritical services is used to cover common overhead costs and to
subsidize basic exchange rates.  By vertical services, we refer generally to those services and
equipment that contain premium or optional features and characteristics over and above those of
a minimum grade, or basic level, of services.  Residual pricing of basic equipment and services
makes possible universal service.  . . .'); Pennsylvania Pub. Util. Comm'n v. Bell Tel. Co., 55 Pa.
P.U.C. 97, 127-28 (1981).

FN66.  See supra note 46.

FN67.  Most non-wireline applicants under the FCC's principal comparative hearing system
included old RCCs who had a common history and, in some cases, past dealings with each other. 
Most applicants under the lottery system, however, were complete strangers to the
communications business and to each other.

FN68.  See supra notes 15 & 50 and accompanying text.

FN69.  Some new telecommunications services benefit not only their subscribers; they also
benefit the general public, which, for the first time, can reach the new subscribers.  See
Pennsylvania Public Util. Comm'n v. Bell Tel. Co., 54 Pa. P.U.C. 191, 204 (1980) ('universal
service . . . benefits all users and . . . in turn gives rise to positive externalities').

FN70.  See supra note 56 and accompanying text.

FN71.  Television was first demonstrated in public in 1925 (an event comparable to AT&T
Newark and Philadelphia cellular tests in 1970-71). But regular broadcasting did not begin until
1941, 16 years later. Even after subtracting 5 years for the depression, the regulatory gestation
period of television was 11 years.  Similarly, color television technology was first proposed to
the FCC in 1940, but the FCC did not approve standards until 1953, 13 years later. Even
deducting 4 years for World War II, color's gestation period was 9 years.  See K. Bibly, The
General:  David Sarnoff and the Rise of the Communications Industry 128-95 passim (1986).